Major Labour donor could be honoured by Blair

The Indian steel tycoon and major Labour donor Lakshmi Mittal may be granted an honour by Tony Blair when he leaves Downing Street.

The Prime Minister is reported to be debating whether Mr Mittal - who is Britain's richest man - should be included on his resignation honours list.

Mr Blair has the power to award a knighthood or even a peerage to the billionaire businessman, even though he has an Indian passport.

Whitehall sources told the Independent on Sunday: "Mittal is held in very high regard by Tony and it would not be surprising if his contribution to business was recognised."

But opposition MPs warned that the public would be dismayed if the Prime Minister honoured Mr Mittal.

The steel tycoon last week made a £2million donation to the Labour party and has now handed over a staggering £4million to Labour fundraisers.

His recent contribution comes at a time when Labour is suffering serious financial difficulty in the wake of the cash-for-honours affair.

Mr Blair is in the process of drawing up the list, which will be vetted by the House of Lords appointments watchdog following the controversy over loans.

Any award is likely to be given for services to business and industry or for other charitable work.

Last week, Mr Mittal described himself as a "long-term supporter of the Labour Party and the work it has done in the United Kingdom to improve the overall prosperity and prospects of the country since coming to office in 1997."

Mr Blair has returned the compliment describing the tycoon as 'one of the world's most successful businessmen'.

It is believed that only Lord Sainsbury, the former Science Minister, has donated more to Labour party coffers over the past decade.

As an Indian passport holder, Mr Mittal's company does not pay tax in Britain. He simply pays income tax here as a resident.

However, he would be entitled to take a seat in the Lords as a Commonwealth citizen.

Mr Mittal, who is worth nearly £15billion was at the centre of one of Labour's biggest financial scandals in 2001 when Mr Blair allegedly intervened to help him buy a Romanian steelworks shortly after the party took a £125,000 donation from him.

The tycoon, who gave a further £2million in 2005, maintains that the deal was approved by the Romanian government prior to any letter being sent by Mr Blair.

Angus MacNeil, the SNP who triggered the cash-for-honours investigation said: "It would show utter contempt for the public if Tony Blair was to honour another Labour donor in his resignation list."